Posted On Feb 06 2020
Like many of the big moments in a person’s life – weddings, children, graduation – moving homes can be filled with both great excitement and great stress. It’s no secret that in Toronto, and even across Canada, the real estate market is hot. Sellers have to act quickly to ensure they get the best price for their home and buyers have to act quickly to ensure they can close on the property they want. Many finance experts will advise you to not buy a home until you have sold your first one, but to hastily paraphrase Ferris Beuller: real estate in this town moves pretty fast. https://www.youtube.com/watch?v=vsYBtfQ3QDo Real estate deals can whizz by faster than a car on the 407 in no traffic (which is to say, pretty darn speedy https://globalnews.ca/news/1313088/driver-caught-going-240-kmh-on-hwy-407/). So, what happens when you find yourself in the position of buying and selling a home at the same time?
Bridge loans are made expressly for this purpose. Here, you can tap into the equity of your existing home to make the down payment on your next home while you wait for the home to sell. Once your home has sold, you use the proceeds to pay off the bridge loan and any fees and interest. The loan averse may be wary of these, but with the Canadian regulations of a 20% down payment on a home that costs $1 million or more (which is $200,000), they may be the only way a homeowner can purchase their next property. You can shop around for the best rate for your bridge loan at one of the big 5 Canadian banks (RBC, TD, Scotiabank, CIBC and BMO) or even possibly explore less traditional avenues like credit unions.
If you’re in a financial position to keep both homes, it may give you the fewest headaches to carry both for a while as you go through the process. Unless you can afford to do this without carrying two mortgages (say you already own your existing home outright), most financial experts caution against this plan, as it will require lots of capital outlay and force you to rely on emergency funds that are best saved for actual emergencies.
If you’re selling and buying a home at the same time, the best outcome is that the closing for the sale of your home occurs just before the closing for the purchase of your new home. Obviously, that takes some good timing, but with good communication between you, your realtors and the other party and their realtors, you could get lucky.
You can try to put in a contingency that your purchase will only go through if you are able to close the sell of your existing home. These carry the risk of the other party rejecting the contingency. Unless you find a very motivated seller (or some other reason why they would agree to this condition) it is likely the person selling the home will reject your contingency in favour of an offer without any conditions.
Another contingency you can explore is the option to rent back. Here, for either a reduced price or rent payments, you can ask the buyer of your home to allow you to rent the home (now sold to them) while you wait to close on your other property. This may be beneficial to the buyer if they’re not in a rush to move in, but if they are also attempting to play the game of Jenga that is buying and selling concurrently, they might not be interested.
Short Term Plans
Most apartments or condominiums or even homes available for rent will have a one-year lease, which is likely too long between your closing and your move-in date, but there are other options available. Short-term rentals, like the kind for business travellers on longer trips, are available with flexible dates. You could temporarily move in with family (if the notion doesn’t drive you – or them! – too crazy) as well. In both of these cases, you’ll likely have to put your stuff in storage, but that shouldn’t be too difficult since you’ve already pared back https://jameswarren.ca/simplifying-tips/ and https://jameswarren.ca/10-moving-tips/ aren’t afraid of moving.
Good luck with this transition – and remember, you can always reach out to us, your transition experts, to help make this move as smooth as possible.
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